We are a contractor in joint venture with a designer and are currently tendering for a design and build project using an NEC4 Engineering and Construction Contract Option C (target contract with activity schedule). The potential client believes the cost of the designer’s staff is recovered under the people component in the schedule of cost components. The designer’s staff will be working out of their own offices and will not be working within the working areas. It is our understanding that the cost of the designer’s staff is recovered under the design component in the schedule of cost components, utilising rates tendered in the table for the defined cost of design outside the working areas in contract data part two. Can you clarify under which component under the schedule of cost components we recover costs for designer’s staff under a joint venture working outside the working areas?
However, the answer as to how the designer’s staff are paid will depend upon the identity of the contractor. You say that this will be a joint venture, but that can be achieved in several different legal ways, some informal and some more formal. We cannot offer legal advice on how that can be done and the pros and cons of the different ways of doing so. But, if you are the contractor named in the contract and the designer is employed by you as a subcontractor (as defined by clause 11.2(19)), you will be paid what you pay your subcontractor as per section 4, provided you pay it in accordance with the terms of the subcontract − see the second bullet of clause 11.2(26) concerning disallowed cost.
On the other hand, if the contractor named in the contract is the joint venture, the designer’s staff will be paid for in accordance with section 7 of the schedule of cost components when they are working in their own offices. However, if and when they are working in the working areas, they will be paid for under section 1, as per the second bullet point of the preamble to that section.